May 17, 2021

Axios Login

I've had all weekend to write a clever intro, so you'd think I have something really good, right? Yeah, not so much. Anyhoo...

Today's newsletter is 1,429 words, a 5-minute read.

1 big thing: The new digital extortion

Illustration: Shoshana Gordon/Axios

If you run a hospital, a bank, a utility or a city, chances are you'll be hit with a ransomware attack. Given the choice between losing your precious data or paying up, chances are you'll pay, Axios' Kim Hart reports in her Tech Agenda column.

Why it matters: Paying the hackers is the clear short-term answer for most organizations hit with these devastating attacks, but it's a long-term societal disaster, encouraging hackers to continue their lucrative extortion schemes.

Driving the news: Colonial Pipeline paid hackers almost $5 million in ransom to restore its systems and get gasoline flowing again after a ransomware attack held the country's largest pipeline hostage, which resulted in widespread disruption of gasoline supply.

The big picture: "This creates a collective action problem — the bad guys win so they'll go out and hit someone else," said Betsy Cooper, director of Aspen Tech Policy Hub at the Aspen Institute.

  • "As an organization, you have to take into account the immediate costs versus the cost of your data. The less prepared you are, the worse it's going to be."

Threat level: Code red. Negotiating can backfire.

  • Last week, foreign hackers released sensitive files they stole from the Washington, D.C. Metropolitan Police Department last month, after the department offered to pay $100,000 rather than the $4 million that was demanded to return the data, DCist reported.
  • The hackers reportedly said they'd keep the files public for months, even if the police department offered more than the original ransom.

Of note: The outfit responsible for the Colonial Pipeline attack announced it was shutting down Friday, but there's no sign the larger problem will abate.

By the numbers: Payments to ransomware attackers rose 337% from 2019 to 2020, reaching more than $400 million worth of cryptocurrency, according to figures just released by Chainalysis, a blockchain analysis company.

  • So far in 2021, hackers have raked in more than $81 million.
  • The average ransom payment has risen from $12,000 in the fourth quarter of 2019 to $54,000 in the first quarter of this year.

Many attacks at the local level go unreported and unnoticed. Attack disclosure requirements vary state by state.

Zoom in: A hospital near Kansas City, Missouri, fell victim to an attack, paid the ransom, and then had to ask the city's government for help making payroll, Mayor Quinton Lucas told Axios. "It's odd how under-discussed [cybersecurity] is when we talk about infrastructure," Lucas said.

The irony: While having several different systems may seem inefficient, it disaggregates the risk, Cooper said.

  • "If you put all your eggs in one vendor's basket, if that vendor has a flaw, then everything that's touched by that vendor will be affected." she said.

Between the lines: State and city governments are particularly vulnerable to attacks because it's well-known that public agencies often rely on outdated systems with less robust security defenses.

  • Prompted by the Colonial Pipeline crisis, the Biden administration issued an executive order last week to encourage data IT data sharing and implement stronger security standards. But it applies to federal agencies and contractors, not the local level.

What to watch: Ransomware groups are getting more hostile and are less likely to restore systems, even when they are paid the ransom, according to Accenture's latest report on cyber threats.

2. With Discovery deal, AT&T ditches content
Data: Company filings; Chart: Axios Visuals

AT&T and Discovery have agreed to create a joint venture that would house WarnerMedia's premium entertainment, sports and news assets with Discovery's nonfiction and international entertainment and sports businesses, the companies announced Monday, Axios' Sara Fischer reports.

Why it matters: The move, which means AT&T will be essentially ending its content business, marks a major course correction by AT&T, essentially confirming shareholder fears that the company's $85 billion merger with Time Warner three years ago was not fully baked.

The big picture: Monday's news confirms that the Time Warner acquisition wasn't enough to create a streaming service sizable enough to compete with the Netflix and Disney alone.

  • AT&T launched HBO Max a little less than a year ago. It has roughly 20 million subscribers. Discovery+ launched in January and has roughly 15 million subscribers.
  • In a statement, the companies said the merger will create at least $3 billion in expected cost synergies annually for the new company.
  • AT&T's market cap is $230 billion. Discovery's is $17 billion.

What they're saying: Discovery CEO David Zaslav said on a press call that he and AT&T CEO John Stankey have been secretly architecting this deal together "for the last few months" from his brownstone.

Between the lines: The deal will help AT&T pay down a massive amount of debt that it accrued from expensive deals over the years, including those with DirecTV and Time Warner.

Be smart: Investors have been urging AT&T to do something more strategic with its media assets for months.

  • AT&T initially said it would use the assets to create a streaming behemoth. It's become clear over the past few months that the service hasn't grown big quickly enough to compete alone.

What's next: The transaction is expected to close mid-next year, subject to regulatory and board approvals. Zaslav said the new venture's name will be announced later this week or next week.

3. Gates faces scrutiny over affair, Epstein ties

Representatives for Bill Gates pushed back on claims Sunday that he left Microsoft's board because of an earlier sexual relationship and against two other reports detailing more extensive ties with Jeffrey Epstein than had previously been reported.

Driving the news: Microsoft said in an emailed statement to Axios that it "received a concern" in 2019 that its co-founder "sought to initiate an intimate relationship with a company employee in the year 2000," but denied a Wall Street Journal report that its board members thought Gates should resign over the matter.

  • "A committee of the Board reviewed the concern, aided by an outside law firm, to conduct a thorough investigation," per the statement. Notably, Microsoft refused to say what the finding of the investigation found.
  • The New York Times reports that Melinda Gates expressed concern about her husband's relationship with Epstein and other questionable behavior long before they announced they were divorcing.
  • This included his "handling of a previously undisclosed sexual harassment claim against his longtime money manager" in 2018, according to the Times.
  • The Daily Beast reports that Epstein advised Gates on how to end his "toxic" marriage as the Microsoft founder used the disgraced late financier's $77 million New York townhouse as an escape.

Of note: Sources close to Gates have called claims that he had any personal conversations with convicted sex offender Epstein in meetings about philanthropy — whether about his marriage or anything else — "simply not true."

What they're saying: A spokesperson for Gates reiterated a statement to NYT that it's "extremely disappointing that there have been so many untruths published about the cause, the circumstances and the timeline of Bill Gates' divorce."

4. Cameo CEO says he would let Trump join

Cameo CEO Steven Galanis doesn't want the app he built to be used explicitly for politics, but said he would allow former President Trump on the platform, Axios' Sara Fischer reports.

  • "Trump has done nothing on our platform to violate our terms of service," Galanis says in an interview with "Axios on HBO" that aired Sunday.

Catch up quick: Cameo is an app that lets fans pay for personalized videos from celebrities. It was recently valued at over $1 billion, given its unprecedented success during the pandemic, when many Hollywood stars were out of work.

Between the lines: Cameo has been used for politics, but Galanis says it's not in the company's plans to double down on that function.

  • "I think Cameo is a place for laughs. It's a place for fun," he said in the interview.
  • Last year, for the first time in its four-year history, Cameo enabled political fundraising in the U.S., so that surrogates could raise money for political candidates. But Galanis says this isn't something he plans to expand.

By the numbers: Galanis said political fundraising videos accounted for less than 1% of its total revenue last year, which was about $100 million.

The bottom line: "We're in the middle of a big growth spurt," Galanis says, and that means the company still has to "create our own policies that work uniquely for Cameo, because the rules of our platform are different than they are for YouTube, Instagram, and for Twitter."

5. Take note

On Tap

Trading Places

ICYMI

  • Several U.S. game news sites posted and then removed articles supporting Palestinians. (Axios)
  • The Wall Street Journal has an in-depth look at Foxglove, a group of four women who pushed back against the U.K. government's use of algorithms to make visa decisions and are now looking at how tech workers are treated. (Wall Street Journal)
6. After you Login

Check out one of Steph Curry's kids doing his impression of how his dad celebrated during a key victory on Sunday. And Steph's jersey lift was itself a take on a famous Baron Davis move.